Tag: Regulation

The Libra Association— the non-profit organization behind Facebook’s Libra— has announced it is seeking to apply to become a licensed payment system under the Swiss Financial Market Supervisory Authority (FINMA).

The association announced on Wednesday that the license under FINMA can empower billions of people. In addition to that, the association has also submitted a request for an assessment of how it would classify the Libra project.

The Swiss financial regulator further noted that due to the issuance of Libra payment tokens, the services planned by the Libra project would clearly go beyond those of a pure payment system, signifying it would be subject to additional requirements.

The agency further explained that such additional requirements would relate in particular to capital allocation (for credit, market and operational risks), risk concentration and liquidity as well as the management of the Libra reserve.

On the other hand, the Libra association has explained in a statement that Switzerland provides a pathway for responsible financial services innovation harmonized with global financial norms and strong oversight.

It further added:

“We are engaging in constructive dialogue with FINMA and we see a feasible pathway for an open-source blockchain network to become a regulated, low-friction, high-security payment system.”

Ever since Libra launched, regulators all over the world have shown concerns over Libra raising the risk of money laundering through its global cryptocurrency available to millions of users on Facebook. Just yesterday, U.S. Treasury official Sigal Mandelker reiterated that Facebook’s Libra project must without doubt meet the highest standards of regulatory compliance prior to its launch.

Most recently a group of U.S. lawmakers, led by Democratic Congresswoman Maxine Waters, met FINMA officials to discuss the Libra project. However, the meeting did not erase Waters’ concerns. In fact, Congresswoman Maxine Waters—who called for a moratorium to halt the project—recently traveled to Switzerland to examine how the Libra project would work.

Global money-laundering watchdog the Financial Action Task Force (FATF) is also said to be looking into Libra. FATF President Xiangmin Liu stated that they want to make sure that in case there are significant risks, they must be addressed and dealt with.

In response to the abundance of criticism, the Libra association has reiterated its commitment to work with regulators.

“Since our vision for the Libra project was announced three months ago, we have maintained our commitment that technology-powered financial services innovation and strong regulatory compliance and oversight are not in competition,” said Dante Disparte, Libra Association’s head of policy and communications.

Leading crypto exchange Binance has announced its partnership with digital asset trust company Paxos to launch a USD-pegged stablecoin.

According to the announcement made on Thursday, the two companies will launch a USD-pegged stablecoin called Binance USD (BUSD). The stablecoin has already received the approval of the New York State Department of Financial Services (NYDFS) and will be available for trading later this month.

Paxos co-founder and CEO Asia Rich Teo has stated that the NYDFS’s approval of the stablecoin is a vital step towards long term stability in global crypto markets. He further added:

“We are proud that our stablecoin as a service offering enables trusted companies like Binance to introduce products customized for their users. The Paxos brand symbolizes regulatory integrity, consumer protection and transparency for all of our partners.”

The upcoming stablecoin will be backed by U.S. dollar on a 1:1 ratio. In addition to that, a Binance spokesperson stated that the BUSD will be built on the Ethereum blockchain, however it may move to Binance Chain in the future.

The coin will start trading on Paxos’ and Binance’s exchange platforms later this month. Paxos will issue the coin and look after the reserves of dollars–and Paxos customers will be able to directly purchase BUSD tokens through the company’s wallet using either U.S. dollars or PAX, its own stablecoin. Binance users will likewise be able to trade BUSD on the platform.

BUSD will trade against three cryptocurrencies – Bitcoin (BTC), Binance coin (BNB) and XRP – on the platform. According to the announcement, Paxos will act as both the custodian and the issuer for the stablecoin, and will regularly audit the dollar holdings.

Binance CEO Changpeng Zhao, commonly known as “CZ”, stated that Paxos is leading the digital trusts space and further added that Binance is excited to work with them in developing their native stablecoin.

“We hope to unlock more financial services for the greater blockchain ecosystem through the issuance of BUSD, including more use cases and utility through the power of stable digital assets.”

Following this news, BUSD joins the Paxos Standard and the Gemini Dollar as an NYDFS-approved stablecoins.

Meanwhile, Binance has been steadily showing interest in stablecoins. The exchange previously announced its intention to issue stablecoins worldwide as part of its Venus project. Back in July, it listed BGBP stablecoin, which is pegged 1:1 to the British pound, however is built on the Binance Chain blockchain network. At the time, the company said it would launch a collection of stablecoins pegged to different fiat currencies.

Amidst a turbulent 365-day period during which the Argentine fiat currency – the Peso (ARS) – has lost over half of its value against the U.S. dollar, the country has announced the enforcement of new capital control measures, limiting citizens’ and businesses’ freedom to buy foreign currency.

The decision has been made most likely to encourage more people to use digital currency, particularly the Bitcoin to bypass the restrictions as they have done in other nations.

On Sunday, the central bank imposed restrictions on businesses following a decline of over 25% in the value of the peso since local elections last month. The government’s decision comes after the BCRA lost $3 billion in reserves late last week. An official announcement read:

“Given diverse factors that affected the evolution of the Argentine economy and the uncertainty caused in the financial markets, the [government] considered it necessary to adopt a series of extraordinary measures aimed at assuring the normal working of the economy, sustain the level of [economic] activity and employment, and to protect consumers.”

The president of Argentina Mauricio Macri recently signed a bill that introduced limitations on foreign currency purchases. According to the new measures, large exporters will be required to obtain permission from the central bank of Argentina to buy foreign currency and transfer it abroad.

In addition to that, companies as well as banks must seek authorization to sell ARS for foreign currency, and individuals will not be allowed to buy over $10,000 per month. This measure will be in effect until December 31st, 2019.

In August, Argentine peso and government bonds collapsed amidst the crushing defeat of incumbent President Mauricio Macri in the primary. At some point, on local exchanges Bitcoin was trading $300 higher than the average market price.

Meanwhile, a further decline in the peso threatens hyperinflation, which will certainly force many citizens to look for alternative ways to save money. Cryptocurrency may serve the need in this situation.

The new capital control measures represent an improvement from older laws which required a purchase limit for individuals of $2,000. It also removes a hurdle that required individuals to present to the country’s revenue service (AFIP), evidence to justify their income before they can buy dollars.

Whilst Argentineans are now legally barred from purchasing above $10,000 monthly, Bitcoin does not place a cap on the number of units that anyone can hold. Additionally, there is no limit to the amount that can be transacted within a particular time frame.

Argentinians could look towards China for solutions on subverting state capital controls. The Chinese are still big on Bitcoin despite every effort from the government to quash it. Peer to peer trading has increased there and it appears to be on the rise in Argentina also.

According to data on localbitcoins volume for the Argentine peso has surged this year. It peaked in July topping $15 million for the week and has been high in August at over $12 million.

Either way, the latest capital control measures have highlighted Bitcoin’s strength and raised hope that soon, more than a few Argentines will consider the cryptocurrency as a ‘safe-haven asset’ amidst the growing economic uncertainties.

Blockchain company R3 announced its partnership with Dubai fintech startup Wethaq, with the goal to build a next generation financial market base for Islamic markets.

According to the news, Wethaq is targeting Islamic Financial Markets and is aiming to use R3 Corda’s blockchain to manage the pre-sale, issuance, management and financialization of Sukuk securities. The Sukuks are an Islamic financial certificate, similar to the western bond, which comply with Islamic religious law known as the Sharia.

Based on the International Islamic Financial Market Annual Sukuk Report 2019, the total issuance of Sukuk reached $123.15 billion in 2018, showing a 5% increase from $116.7 billion in 2017. In addition to that, it has been estimated that the total sukuk issuance in 2019 would be the same as the previous year.

Although charging interest may be prohibited under the Sharia Law, rent is not. As a result, some Sukuk monetary certificates function like bonds (‘ljara’). However, instead of paying interest, these Sukuks are sometimes issued at a discount and are tied to an asset which is then leased. Most of the lease payment goes to the investors. Therefore, at maturity, they yield a capital gain. This makes Sukuk securities, one of the most sought-after investments.

Similarly to bonds, Sukuks have somewhat manual issuing processes. Therefore, Wethaq began working on a proof-of-concept for a blockchain solution to the Sukuk management, which would not only comply with Sharia, but have the distributed ledger operate as a registry plus the central securities depository.

The solution aims to digitize Sukuk using Corda which will lead to decreasing both the cost and time of issuance, a process that currently involves input from a number of institutions. For instance, the decentralized platform seeks to take on the roles of a registrar, CSD, trustee-delegate, paying agent, calculation agent and transfer agent.

Furthermore, by standardizing the digital assets with global financial architecture, it could lead to wider distribution, and therefore more issuers and investors. Overall, it would help improve interoperability and establish a network for customers, providers, and regulators to communicate.

On that note, the CEO of R3 David E. Rutter has stated that blockchain is currently driving an unprecedented period of innovation across capital markets, with more assets undertaking complete digitization.

He further added:

“Saudi Arabia and the wider Middle East region are areas where we see huge potential for Corda to modernize the economy and our partnership with Wethaq is a step towards achieving that.”

Mohammed Alsehli, the CEO of Wethaq, also comment on the partnership with R3 as well as the goals of the firms. He stated:

“In building the next generation of financial market infrastructure for Sukuks we have found a valuable and trusted partner in R3 and its Corda Enterprise software. Our joint focus is on building world-class financial infrastructure in Saudi Arabia, in alignment with the Kingdom’s Vision 2030, and the UAE, pursuant to their ambitious fintech agenda, before we expand to the entire Middle East and South-East Asia.”

Social media giant Facebook has hired a Washington-based lobbying firm in an attempt to influence U.S. lawmakers over its Libra cryptocurrency project, according to a report from O’Dwyer PR.

Citing lobbying registration documents filed with Congress, the report revealed that FS Vector will now support the social media giant on issues related to blockchain policy.

Founded last year, Washington-based FS Vector is an advisory firm that specializes in regulatory compliance, public policy, as well as business strategy for the fintech, cryptocurrency, blockchain and financial services sectors.

According to the report, FS Vector partner John Collins will lead the Facebook account. Prior to this job, he served as former vice president of international policy at the American Bankers Association’s international subsidiary, the Bankers Association for Finance and Trade. He also worked as Senior Professional Staff for the U.S. Senate Committee on Homeland Security and Governmental Affairs and led Congress’ first work into digital currencies in 2013.

FS Vector joins a number of other lobbying companies, which include the Sternhell Group, the Cypress Group, Davis Polk, Baker Hostetler and the OB-C Group. Facebook has also recently hired UK Standard Chartered lobbyist Ed Bowles as its London-based director of public policy.

Earlier this month, the social media behemoth also hired Susan Zook of Mason Street Consulting, a former aide to Senator Mike Crapo (R-Idaho), the chairman of the Senate Banking Committee – to lobby for Libra.

The news follows as Facebook is getting pressure from U.S. lawmakers over its planned global cryptocurrency project. Primarily, lawmakers are concerned over user privacy and trust, especially since the company has been previously found violating user’s privacy.

Facebook formally disclosed the details of the Libra initiative in June, which could potentially bring the world’s “unbanked” billions into the digital economy by allowing anyone to safely buy, sell or send money to others via Facebook. The proposed digital currency, which has yet to meet regulatory approvals, is set to launch sometime next year.

Meanwhile, Facebook‘s recent visit to Switzerland’s financial authorities has received even more scrutiny from U.S regulators, such as the firm has notably chosen to register the Libra Association in Switzerland.

At a hearing before United States House representatives in mid-July, chief of Facebook’s Calibra wallet service David Marcus had claimed that the choice had “nothing to do with evading regulations or oversight,” arguing instead that the jurisdiction is an international hub conducive to doing business.

Also in July, U.S. lawmakers drafted a bill – “Keep Big Tech Out Of Finance Act” – which aims to prohibit large platform utilities from being a financial institution or being affiliated with a person that is a financial institution, and for other purposes.